Tencent offers to buy Chinese online travel service eLong

eLong was already bought by a group of companies from Expedia earlier this year

The competition is heating up in China as Tencent, the second-largest Chinese Internet company, is looking to expand its horizons a bit, and challenge Alibaba, aka its biggest rival, by getting into the travel business. It's going to do that, of course, by acquiring a major travel site.

The company has made a proposal to buy eLong, which is a Chinese online travel service provider offering hotel and air ticket booking services, it was announced on Monday. It is offering $18 per American depositary share in a preliminary, nonbinding proposal. That represents a 24% premium to eLong's closing price stock price on Friday.

Tencent already owns part of eLong: 5,038,500 high-vote ordinary shares and 6,031,500 ordinary shares of eLong, which adds up to approximately 15.0% of the aggregate voting power of the Company.

Investors seem happy with the potential transaction; on news of the proposal, eLong's stock jumped over 12% in after hours trading, after it has slumped 1.93% in regular trading to $14.22 a share.

Right now, Tencent is probably best known as the owner of mobile messaging app WeChat, which now has 500 million monthly active users, but the company has its hands in many different pots at once. It also owns electronic messaging platform QQ, and earlier this year paid $126 million for a 14% stake in game studio Glu. Other properties include auction site PaiPai.com, taxi hailing service Dididache, and online payment system TenPay.

Getting into the travel business would seem like another logical move for Tencent, and doing so would help Tencent compete against Alibaba, which rebranded its Taobao Travel division as an individual unit called Alitrip in October of last year. At the time, Alitrip already had has over 10,000 merchants on its platform providing airplane tickets, vacation packages, hotel booking services, visa application services and tour guide services.

If the deal does go through, this would be eLong's third owner this year. The company was part of the Expedia family since 2005, when IAC/InterActiveCorp. took a controlling interest in the  company. Expedia sold the company sold off its majority sake in the company for $671 million. Buyers in the deal included Ctrip.com International, which is China's largest trip-booking website, as well as Keystone Lodging Holdings, Plateno Group and Luxuriant Holdings

VatorNews has reached out to both eLong and Tencent for further comment on the propsed acquisition. We will update this story if we learn more. 

(Image source: commons.wikimedia.org)